Key Takeaways
New York sued KalshiEX in state court on July 31, alleging the prediction market runs an unlicensed gambling operation and skips the taxes licensed casinos and mobile sportsbooks pay.
The petition asks the court to stop Kalshi from operating in the state, forfeit all gains, pay restitution to users, and pay fines equal to three times the company's illegal gains.
The suit also alleges Kalshi is open to users aged 18 to 20, below New York's legal age of 21 for mobile sports betting.
The fight over who regulates prediction markets just moved from letters to a courtroom. Governor Kathy Hochul and Attorney General Letitia James announced on July 31 that New York has sued KalshiEX, arguing that what the company calls event contracts is gambling under state law.
The state's theory is simple. The outcomes users bet on are uncertain, outside the bettor's control, or turn on chance, which is what New York law defines as gambling. Kalshi never obtained a license from the New York State Gaming Commission, so it never paid the taxes that fund public schools, youth sports programs, and problem gambling treatment. The Gaming Commission had already sent Kalshi a cease and desist in October 2025.
"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James said. The office is asking for forfeiture, restitution to users, and fines set at three times the company's gains, a figure a statement of facts filed with the suit put as high as $36 billion.
Kalshi's position has not moved. The company maintains it operates a federally regulated commodities exchange under the Commodity Futures Trading Commission, not a casino, and the Trump administration has backed that reading of the jurisdiction question. That disagreement is the whole case, and a state court is now going to answer it.
New York has been building toward this for months. James sued Coinbase Financial Markets and Gemini Titan in April over the same category of contracts, and Hochul signed an executive order that month barring state employees from using prediction markets for insider trading.
The stakes are a function of how big these venues got. WYDE reported that Kalshi and Polymarket reached about 27 percent of US sports betting during the World Cup, with a single final contract clearing $1.27 billion. Regulators tend to arrive after the volume does, which is the same sequence behind Circle's new New York trust charter. Worth watching.
People Also Ask
Why is New York suing Kalshi?
The attorney general alleges Kalshi runs an unlicensed gambling business in New York, has not obtained a Gaming Commission license or paid gambling taxes, and allows users aged 18 to 20 to bet when state law sets the minimum at 21 for mobile sports betting.
What is New York asking the court to do?
The petition seeks an order stopping Kalshi from operating as an unlicensed gambling business, forfeiture of all illegal gains, restitution to affected users, and fines equal to three times the company's gains.
Are prediction markets legal in the United States?
That is the unresolved question. Kalshi operates as a CFTC-designated exchange and argues event contracts are federally regulated derivatives. Several states argue the same contracts are gambling under state law. Courts are now sorting out which regulator controls.
Has New York sued other prediction market operators?
Yes. In April 2026 the attorney general filed petitions against Coinbase Financial Markets and Gemini Titan over their event contracts, describing them in the same terms as the Kalshi filing.